# Unit Mix Section - Part 2

###### Transcript

Welcome to this video. In this video, I am going to continue to cover other assumptions in the Unit Mix tab of ARGUS Multi-Family Model.

##### Renovation Cost

Let’s move to input Renovation Cost per unit column, click the INPUT RENOVATION COST button, it represents the renovation cost per unit. Assume that in the first year the renovation cost was 36,403 dollars, then click copy down and across, then the cost will increase by 3% each year, input *1.03 in the box on the top left corner. Then click calc and save. Then go to the TENANT MONTHLY tab, you can find it in the Renovation Schedule section. In the Renovation Schedule tab, the last column of the renovation cost section comes from the Renovation cost per unit of TENANT MONTHLY tab, and the first column of the renovation cost section comes from the Renovation period section of TENANT MONTHLY tab. And renovation cost of the first month of the first year of small studio equals to the number of renovation units times the total cost of the first year, then divided by the renovation period. In this case, (13 x 36,403)/ 2=236,620 dollars.

Worth mentioning, the renovation cost here also link to the ANNUAL CF SUMMARY tab, we can see the Renovation Disruption, which is the rental loss due to the renovation. It is calculated by multiplying the number of renovation units of the first year by the rental rate before renovation, then multiplied by 2 to account for the renovation period of 2 months. And this row only has 2 data points, which means that the renovation only happens in the first 2 years. Then we can see the renovation cost under the renovation cost and capital expenditure section. The renovation cost is calculated by multiplying the number of units to be renovated in the first year by the renovation costs in the first year. This row has only 2 data points as no more units will be renovated during the remaining years. In this case, 13x36,403=473,239 dollars.

What’s more, let’s look at the USES AND SOURCES tab, the renovation cost here comes from the monthly CF summary tab, we will discuss it later in another video about how the renovation cost is financed.

##### Lease to Loss

Lease to loss means that when the rent is lower than market rent, it will incur an economic loss. Click the INPUT LEASE TO LOSS button, lease to loss is fixed at all times, so input 0.03 at the first white box, then click copy down and across. Then click Save.

Lease to loss links to the Monthly CF Summary tab, it equals to the Gross potential income times the lease to loss rate. In this case, (1,500 x 27 + 1,875 x 0) x 3%. At last, we annualize the number by multiplying it by 12 months so that we can get the annual lease to loss number.

##### Vacancy Loss

Click INPUT VANCANCY LOSS button, it represents the loss of empty units, input 10% for the first month of the first year, then click copy down and across and click save.

Vacancy Loss is linked to the Annual CF Summary tab, which is calculated as the vacancy loss rate 10% times the scheduled rent.

##### Employee Loss

Sometimes the building managers will rent a unit at a discount. This economic loss is the employee units’ loss. Click INPUT EMPLOYEE UNITS button, input 0.01 for the first month of the first year, then click copy down and across and save.

In the annual CF Summary tab, the employee loss is calculated as the scheduled rent times the employee loss rate of 1%.

##### Model Unit Loss

Model Unit Loss means the rental loss due to the sample units. As before, input 0.79% for the first year, then click the copy down and across, and click save.

In the annual CF Summary tab, model unit loss is calculated as the scheduled rent times the model unit loss of 0.79%.

##### Other Unit Types

Now we have finished the first unit type, let’s do the next unit type: Large Studio, 20 for the number of units, 600 for the average square feet. Click the INPUT RENOVATION SCHEDULE button, input 10 units for the first month of the first year and another 10 units for the first month of the second year. Click save. Then click INPUT RENOVATION PERIOD button, set 2 months for the first month of first year and click copy down and across, and click save. Then click the INPUT MONTHLY RENT button, input 1,550 dollar as the rent of first month of the first year, then click the copy down and across, I will say the rent before renovation increases by 4% each year so type in times 1.04, then click the calc button on the first row, then click save.

For the timing being, I am not going to input all the unit types in this video. The rest of the process is largely the same as the first 2-unit types.

Alright that is all for this video, thank you for watching.